Looking back one year after enactment of Canada’s Modern Slavery Act

In 2024, ethical business practices are increasingly under the spotlight. Canada has taken a significant step forward with the 2024 Annual Report to Parliament on the Fighting Against Forced Labour and Child Labour in Supply Chains Act. This landmark legislation aimed to shed light on the often-unseen practices within supply chains that can have severe implications for human rights. 

Purpose of the Supply Chains Act  

The Act came into force on January 1, 2024. It is designed to uphold Canada’s international commitment to combat forced and child labor. The Act mandates certain government entities and corporations to report annually on their efforts to mitigate such risks within their supply chains. Therefore, this not only fosters transparency, but also holds these organizations accountable for their contributions to ethical practices. 
Figure 1: In-scope company requirements for the Canadian Modern Slavery Act 

Reporting Requirements and Public Safety Canada’s Role 

Each year, reports must be submitted by May 31. These must detail structures, policies, and the due diligence processes in place to tackle forced and child labor risks. Public Safety Canada plays a pivotal role as the federal body overseeing the Act’s implementation and enforcing reporting obligations. Throughout the first reporting cycle, Public Safety Canada has been instrumental in setting up the necessary frameworks, publishing guidance, and engaging with stakeholders to ensure widespread understanding and compliance. 

Key Outcomes from the First Reporting Cycle  

The initial year of reporting has been a foundational period for Canada. A total of 5,795 submissions were received by the deadline, with government institutions and entities both highlighting areas of potential risk and detailing their remedial actions. Public Safety Canada received a notable number of joint reports, allowing for a more comprehensive analysis of corporate group activities. 

The report also reveals the diverse strategies employed to identify and manage risks, from the development of supplier codes of conduct to thorough internal assessments. Despite this, while many organizations have begun mapping their supply chains to identify risk areas, a significant portion has not yet started this process, underscoring the ongoing journey toward complete transparency. 

Measures to Combat Forced and Child Labour 

Many government institutions and entities have taken proactive steps to prevent and reduce labor abuses. Common strategies include integrating anti-labor abuse clauses in contracts, conducting supplier audits, and implementing mandatory employee training. However, challenges remain, particularly in gaining visibility into complex supply chains that often involve multiple layers of suppliers and subcontractors. 

Despite the complexities, the report highlights the dedication of many organizations to adopting stringent ethical standards. Some have even established grievance mechanisms to allow anonymous reporting of labor abuses. This ensures that workers’ voices are heard without fear of reprisal. 

Monetary Impact on Supply Chains in 2024 

The introduction of the Supply Chains Act has not only prompted a shift in ethical practices but also brought about a notable monetary impact on businesses. Compliance with the Act has led many organizations to reevaluate their supply chain processes, often resulting in increased operational costs. Companies are investing in new technologies and systems to map and monitor their supply chains more effectively. This proactive approach, though initially costly, is seen as a long-term investment in brand reputation and consumer trust. However, some entities have reported challenges in balancing these costs with maintaining competitive pricing, highlighting a tension between ethical compliance and economic viability. 

Economic Benefits and Challenges 

While the initial financial outlay for compliance is significant, the Act also presents economic opportunities. By aligning with global ethical standards, Canadian companies can enhance their marketability. This is particularly true in international markets where consumers are increasingly mindful of sourcing practices. Furthermore, robust compliance can mitigate the risk of potential fines. Under the Act, penalties can be as high as $250,000 for non-compliance. Entities that have embraced the Act’s requirements report improved supplier relationships. As a result, they have experience a reduced risk of supply chain disruptions, offering a competitive edge. Nonetheless, the journey is not without hurdles. Smaller businesses might struggle with the cost of implementing necessary changes, underscoring the need for continued support and guidance from regulatory bodies. 

As the Act continues to influence supply chain dynamics, businesses are encouraged to view compliance not just as a regulatory requirement, but as a strategic advantage in the ever-evolving global marketplace. 

Looking Ahead  

The first year of the Supply Chains Act has set a firm foundation for future efforts. It has highlighted the need for continued collaboration between government bodies, corporations, and civil society to eradicate forced and child labour. As awareness grows and reporting practices become more robust, Canada is poised to lead by example in promoting human rights within global supply chains. 

As we look forward to subsequent reports, the hope is that more entities will engage deeply with their supply chain processes, ensuring that every product brought to market is free from the taint of exploitation.   

Everstream Analytics helps companies identify forced and child labor risk in their networks, through sub-tier supplier discovery and mapping, watch-list screening, and global 24/7 monitoring. With network risk transparency, companies can quickly uncover potential compliance threats, identify and address at-risk suppliers, and respond confidently to regulatory requirements.